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Dow at 2-year low, near bear territory
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Stocks sank on Wednesday, pushing the blue-chip Dow to its lowest close since March 1999, after a surprise uptick in inflation damped hopes for a near-term interest-rate cut to kick-start the economy.
Wall Street also was suffering from a hangover one day after the US Federal Reserve fired off a rate cut that many felt was disappointingly small. Investors also are loath to place cash into a stock market routinely pummeled by fears over slowing corporate earnings in the sluggish economy.
"There are people who think if only the Fed would cut rates enough, everything would be OK. But there may be more people coming to the conclusion that short rates are not really what the market's problem is," said Jay Mueller, economist and portfolio manager at Strong Capital Management Inc, which oversees about US$45 billion. "The problem is earnings. That's what we need to have turn around and it takes time."
The Dow Jones Industrial Average tumbled 233.76 points, or 2.40 per cent, to 9,487, spiraling down to its lowest close since early March 1999. The Dow now is only 108.62 points away from bear territory, defined as a 20 per cent drop from its peak of 11,722.98 on January 14, 2000.
Most economists said they did not see signs of a broad inflation threat, but many investors felt the figures would keep the Fed from cutting interest rates in between its regularly scheduled meetings.
Stocks sank on Tuesday after the Fed announced the third interest-rate reduction this year. That rate cut of 50 basis points, or half a percentage point, disappointed investors who had been hoping for a 75-basis-point reduction in borrowing costs to rejuvenate the economy. (Agencies via Xinhua)
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